Category Archives: Business/Economy

Post navigation

Robert Samuelson wrote an article that I have been thinking about for a while. There is a fight happening in this country that pits the young versus old, worker versus retired, child versus parent:

The elderly’s interests are running roughshod over other national concerns . Social Security, Medicare and Medicaid — programs heavily for the retired — dominate the budget, accounting for about 44 percent of spending, and have been largely excluded from deficit-reduction measures.

Almost all the adjustment falls on other programs: defense, courts, research, roads, education. Or higher taxes. The federal government is increasingly a transfer agency: Taxes from the young and middle-aged are spent on the elderly.

And Social Security, Medicare and Medicaid are only growing as portion of our government dollars.

It’s uncomfortable but frankly, I’m tired of being pushed around by my parents and grandparents generation. Our school budgets are cut, our roads don’t get repaired, our cities file bankruptcy, all while they give themselves the retirement benefits they promised themselves.

Incredibly good article from Aaron Hillegass outlining why starting a company is a bad idea even though he did it (and so did I). One of my favorite lines is this one:

I’ve been broke, and being broke sucks balls. Having Enough is awesome. How would I define “Enough”? Enough means that you can take a friend out to a nice lunch and not have to worry about how much it costs. I have hung out with a couple of billionaires—my experiences indicate that being a billionaire is just incrementally better than Enough.

I have never cared about being a billionaire. I’ve only cared about this description that Aaron defines here. I just want Enough, too.

By the way, if you want to learn how to code for iOS and OS X, start at Aaron’s company’s site, Big Nerd Ranch. Their books are incredible.

Jeff Bezos presented this video on Charlie Rose, I believe, highlighting a future where Amazon could deliver merchandise in less than 30 minutes via drone.

It’s fanciful and not very realistic for most items my family has ordered from them. (We bought a really nice air mattress bed recently that would take a small army of drones to move.) It still feels like a very long way off since the FAA keeps dragging its feet on drones for commercial use.

Om Malik fills in with some questions that Charlie Rose forgot to ask, including a very good one: why is Bezos, a very secretive and private man about his future business ideas, showing this now, clearly years before it is even feasible?

I have another: who will be buying stuff from Amazon? [1]

In the 1950s the general contract was that employers will pay employees enough to buy their stuff. That contract is broken now. We seem to so rarely think about the human costs of automation. Yes, it’s inevitable that this will happen. Computers will rule the world. What I never hear discussed, though, is how people will live when Amazon needs a tiny fraction of employees, compared to Walmart, which utilized a tiny fraction compared to mom-and-pop shops.

—

[1] Yes, I know I keep bringing this up. I’m still looking for answers.

Apparently the average store was 5000 square feet, which means at its peak Blockbuster accounted for 45 million square feet of retail space! According to this article there is 14.2 billion square feet of retail space or 46.6 square feet per capita. According to the same article there were 1.1 million retail establishments in the US, or 1 establishment per every 313 people. Walmart generated revenues of $444 billion in 2012, $310 billion of that in the US. In fact the top 10 retail establishments alone generated $2.2 trillion of revenue in the US alone!

According to this article, we spent $200 billion online in 2011 and that is expected to rise to $327 billion in the next couple of years, although my guess is that is low. In 2012, Amazon alone generated $61 billion in revenue, all online of course.

I have shopping down the street. In fact if you live in the US almost everyone has shopping down the street. The former Borders store is still completely empty and across the street the remnants of the Blockbuster sign are still visible even though it closed years ago. Across town the Party Warehouse store sits empty and over by the mall the former Circuit City store has never really found a permanent new resident.

Meanwhile many more are on the brink. Can Best Buy survive and its 56 million square feet of retail space? How about Sears and J.C. Penney?

Why do I bring all this up?

Think of all the retail space Blockbuster controlled at its peak. 9000 stores. 45 million square feet. Think of all the employees that worked there. All those stores, all those employees without jobs, gone. Done in by Netflix, primarily, who employs next to no one.

If Walmart gets destroyed by Amazon then where do people work? Does Amazon hire them all as local delivery people?

So here’s the theme running through my head: as more businesses go online, as Amazon does to Walmart and Best Buy what Walmart and Best Buy did to mom and pop shops everywhere, what moves into these retail outlets? And where does everyone work? And if people aren’t being paid, then how do they buy goods and services, which keep other retail stores alive? And if people aren’t making money then who pays taxes that pays for the military, social security, Medicare, schools and all the other things a lot of people have come to expect from our society?

I’m not saying it’s going to play out this way. Something has always come along and smart people have shifted, from farms to factories to retailers.

But it doesn’t mean we can keep assuming the same rules apply, either.

A couple of weeks ago I mentioned that I was at a conference and waiting to meet Steve Blank when he abruptly left and I ended up meeting Tim Gieseler instead. I wrote about this in a post called Accidental Meetings. Tim ran his business, Orion Telescopes, for over 30 years. In January I will start year 17 for Infinity Softworks.

One of the things we talked about was the challenges of running a company long-term. As he pointed out, thinking in terms of a decade or two instead of a year or two changes one’s perspective on the business, particularly when dealing with business fluctuations.

When thinking short-term, there isn’t a year or two to let the business grow naturally, to take its winding and weaving course, to let the business be the living, breathing thing that it is. When thinking short-term the business managers are forcing it in a certain direction, needing it to grow in the manager’s timeframe.

We’ve been experiencing a dip in the business the last few years. In fact for the first time professionally we have been doing contract work to pay the bills. If I was to zoom in on this two-year period, the graph may look a little something like this:

Pretty flat overall with a lot of ups-and-downs month-to-month.

If I was working on a short-term business, one I hoped to sell in three, four, five years, then this period would be fatal. It would be a lot of treading water, which I couldn’t afford to do.

But I don’t see business this way. I see it as something that needs to grow and change in its own time. Hopefully, when I zoom out on the life of Infinity Softworks, this period will seem like an inconsequential dip somewhere in the middle:

As Tim said, there is a natural cycle to these things. Just keep pushing through it if you believe in what you are doing.